Mondadori Group 9M14 Results Conference Call November 13,2014
Agenda 9M14 Highlights Market Trends 9M14 Results Business Areas FY 2014 Outlook 2
9M14 Highlights Revenues down by 7.7% (-4.8% like-for-like due to the spin-off of advertising activities to the joint venture Mediamond, effective as ofjanuary, 1 st 2014) EBITDA amounted to 36 million compared with 8.9 million in 9M13: the Magazine business (Italy & France) contributed the most (over 50%) to this increase thanks to the combined effect of greater efficiency -deriving from actions on products and reductions in operating costs and of lower restructuring costs Net Financial Position: - 327.4 million, recording a significant improvement towards 9M13 (- 376.9 million) and FY2013 (- 363.2 million). Cash generation in the last 12 months was positive for 49.5 million, result of an ordinary cash flowof 9.8 million and an extraordinary one of 39.7 million (mainly related to the capital increase finalized in June). In the first 9 months of the year, despite the characteristic seasonality, the ordinary cash flow was negative for 8.6 million (- 82.5 million in 9M13) whereas the extraordinary activities generated 44.4 million (including the share capital proceeds) 3
Agenda 9M14 Highlights Market Trends 9M14 Results Business Areas FY 2014 Outlook 4
9M14 Market Trends The sectors in which the Group operates have started to show gradually less marked declines compared to the same period of 2013 Mercato Magazines Books o Bookstores o Large-scale retailers Advertising o Print o Web Circulation -13.5% -5.2% -4.3% -8.2% -8.7% -6.2% -8.7% 0.1% 4.1% Decline in the market due to the general stagnation in consumer spending (in particular in the large-scale retail channel), although at a lower extent towards 1H14 trend (in 3Q -0.9% vs -8% in 2Q) Market share, excluding the large retail channel, at 26% Negative performance of circulation and advertising markets in the Magazine business,even at a lower rate towards 1H14 Mondadori have registered performance better than the reference markets both in the circulation and the advertising collection; market share increased at 32.2% (+1.7 b.p. vs 9M13). In the advertising business, first positive effects from the integrated commercial offer of JV Mediamond Magazines Advertising o Print o Web Circulation -10.3% -8.6% -5.4% -8.0% // 45,7% 36% Negative performance of circulation and advertising markets in the Magazine business Circulation performance of Mondadori France better than the reference market Italy: Trade Books Nielsen, value data (Sept. 2014). Magazines for advertising, Nielsen (Sept. 2014); for circulation, value data, internal estimates (Aug. 2014) France: for circulation, internal estimates (Aug. 2014), value data; for advertising, internal estimates on Kantar Media data(aug. 2014) Mondadori figures are on a like-for-like basis as at September 30, 2014 5
Agenda 9M14 Highlights Market Trends 9M14 Results Business Areas FY 2014 Outlook 6
9M14 Results Revenues -4.8% on a like-for-like basis (net of the spin-off of the advertising business to Mediamond) Personnel costs: -8.1% (on a like-for-like basis and net of the restructuring costs). Employees totalled 3,194 people, down by 242 units vs FY 2013 (-7%) Costs of raw materials (+4.3%) and services (-10.3%) net of the reclassification due to the change in paper supplies and to the increase in third publisher distribution activities Total Operating Costs down by approx. 86 million Other income & expensesdeclining driven by: - reduction in rental leases - capital gains from the sale of titles and business contribution - lower provisions Financial charges: rise due to the new conditions following the renegotiation of credit lines finalized in 4Q13, only partially compensated by the lower average indebtedness in the period 7
2013-2014 Quarterly Net Profit 1Q 2013 2014 2Q 2013 2014 3Q 2013 2014 mio Net Profit in 3Q14 after 7 consecutive quarters negative trend 3.5-6.4-4.6-5.2-15.3-11.8 8
9M14 Results by Business Area REVENUES EBITDA On a like-for-like basis, revenues would be down by 4.8% Marginality 4.2% 1.0% Retail 16% Radio 1% Other 3% Books 26% Advertising Retail Books Radio Holding & Other 36.0 36,0 8,9 8.9 Magazines France 29% Magazines Italy 25% 9M13 Magazines ITA + FR 9M14 9
2013-2014 Quarterly EBITDA 1Q 2Q 3Q 2013 2014 2013 2014 2013 2014 21.1 5.6 9.3 14.2 mio -0.7-4.6 Marginality % on Revenue nm 2.1% nm 3.3% 4.5% 6.8% 10
9M14 EBITDA EBITDA before non recurring items 1H 3Q 9M 14.2 14,2 +5.4-4.4 22.0 22,0 +1.1-0.5 +1.3 +0.2 15.4 15,4 23,9 24.0 36,2 36.2 +4.9-3.3 REPORTED EBITDA 1H 3Q 9M +5.4 14,9 14.9 +13.6 +1.1 +4.0 14.2 14,2 +1.9 +17.5 21,1 21.1 +3.2 8.9 8,9 +1.2 (5.3) (5,3) +1.6 +6.4 39.4 39,4 36,0 36.0 Other non recurring 2014 Other 2014 11 2013 Magazines ITA + FRA Books Other 2014 2013 Books Magazines ITA + FRA Other 2014 2013 Magazines ITA + FRA Books mio 2013 Business Restructur. Other non recurring 2014 2013 Business Restructur. Other non recurring 2014 2013 Business Restructur.
9M14 Net Financial Position Evolution Significant improvement innet Financial Position: o in the last 12 months, the ordinary cash flow was positive for 9.8 million also for the NWC optimization; o the first 9 months of the year, characterized by typical business seasonality, recorded an ordinary cash flow negative for 8.6 million (- 82.5 million in 9M13) and a positive cash flow from extraordinary items of 44.4 million, of which 31.1 million from the capital increase finalized in June and aimed at strengthening the Group financial structure; the extraordinary item Acquisitions /Disposals includes the effects of the spin-off to Mediamond and a down-payment, of 12 million, related to an asset disposal which is expected to be completed within the end of the year 12
NFP Sept. 14 Cash Flow LTM at September 30, 2014 mio Ordinary Cash Flow Extraord. Cash Flow 9.8 39.7-376.9 +52.3-25.4-7.5-10.1 +7.7-7.2-367.1-27.6 +31.1 +23.0-5.1 Operating Cash Flow 42.7 +18.3-327.4 13 Disposals NFP Sept. 13 EBITDA Associates NWC & Funds Investments Net Financials Taxes Ordinary NFP Sept 14 Restructuring Capital increase VAT credit cash-in Acquisitions
Net Financial Position Evolution -200 Consolidated NFP Dec Mar Jun Sept Dec -250-300 -267.6-310.6-327.4 2014 + 35.8 million vs Dec. 2013 + 49.5 million vs Sept. 2013-350 -363.2-367.3-376.9-363.2-400 -396.5-368.9 2013-450 14
Headcount at September 30, 2014 Headcount Evolution 3,703 3,574 3,539 2014 2013 3,436 3,213 3,194 Jan Feb Mar Avr May Jun July Aug Sept Headcount by Business Area 975 903 2014 615 594 587 622 595 678 2013 436 354 27 26 108 48 86 79 Books Magazines Italy Magazines France Retail Radio Advertising Digital Holding 15
Agenda 9M14 Highlights Market Trends 9M14 Results Business Areas FY 2014 Outlook 16
Books: highlights Revenues ( mio) 238.9 234.2 29.7 87.7 +2.0% 13.8 86.8 Distribution & Other Educational Libri Trade: - higher than market decrease due to a different publishing schedule compared with 2013 - overall leadershipposition confirmed (26% market share*): 11 of the 25 best selling titles - launch of the most significant part of the year s publishing programme with the publication of the new Ken Follett novel I giorni dell eternità (120,000 copies sold in just two weeks) - market share in e-books stable at around 40%, with an offer or 8,000 digital titles 121.5 133.6 Trade Libri Educational: rise in revenues due to increased adoptions in primary schools and the performance of the museum business 9M14 9M13 Growth in revenues from third-party distribution EBITDA ( mio) 35.8 39.0 EBITDAdown as a result of the different mix in sales; over 10% growth in the Educational area 9M14 9M13 * Source: Nielsen, value data excluding large retail channel (Sept. 2014) 17
Magazines Italy: highlights Revenues ( mio) EBITDA ( mio) 227.5 26.5 44.8 55.9 25.5 56.9 61.1 100.3 109.5 9M14 9M14 0.4 4.2-3.8-10.1% * In 9M14 portfolio 10 titles less than in 9M13 253.1 9M13 9M13-9.7-9.1-18.8 Other Add-on-sales Advertising Circulation Magazines Advertising The revenues of Mondadori titles (-8.7% on a like-for-like basis*) show better-than-market circulation due to the optimisation of the portfolio and the editorial quality of the titles with: - new launches (Il mio papa) - focus on leadership segments (fashion, well-being and cooking) Despite a fall in add-on sales compared with 9M13, an increase in profitability was recorded Circulation market share in terms of value - of 32.2%, an increase on the 30.5% in 9M13 (internal data, August) Also the performance of advertising sales was better-thanmarket: Mondadori brands recorded advertising revenues (web + print) that were down 7% on the previous year Mondadori International Business: revenues up by 6% due to the expansion of the Grazia Network, now present in 23 countries (monthly sales of more than 10 million copies, 17 million readers, 16 million monthly unique users) Digital: marked increase in the audience for Grazia (+49%), Donna Moderna(+34%) and Panorama(+9.5%) Significant improvement in EBITDA as a result of actions taken on the product and the structural reduction of industrial, editorial and organisational costs, in addition to lower restructuring charges compared with 9M13 (+ 19.2 million including the positive effects of the reorganisation of the advertising activities) 18
Magazines France: highlights Revenues ( mio) 54.1-3.3% 254.2 262.9 6.4 5.9 8.2 5.9 61.8 Web Add-on-sales & Other Advertising Revenues down by -2.3%(on a like-for-like basis*) of which: -newsstand circulation: -5.4% vs -8.0%(internal data, August); positive performances by Top Santè (+19%), Pleine Vie (+10%) and Closer(+6%) - advertising: -10.3% vs. -8.6% (internal estimates on Kantar Media data, August) 186.0 188.8 Circulation Digital: +37% on a like-for-like basis* - revenues from digital copies +79% - revenues from digital advertising +36%, which now account for 10% of total advertising revenues - audience: unique users website 1 of 6.6 million (+26%) and mobile 2 1.7 million (+77%) EBITDA ( mio) 9M14 9M13 22.3 9M14 21.8 9M13 Improved EBITDA as a result of the positive performance of some titles, as well as the rationalisation of structures and reductions in editorial and industrial costs * In 9M14 portfolio 1 title less than in 9M13 1 Source: Nielsen, Aug. 2 Source: Nielsen, Jul. 19
Retail: highlights Revenues ( mio) 144.9 7.6 9.7-5.5% 153.4 7.3 12.1 Other MondadoriStore.it Direct Mondadori Retail s market share in the Books category rose from 13.4% to 14.7% due to a better-than-market performance of around 9 b.p. Revenues continued however to suffer the effects of the stagnation in consumer spending, in particular for consumer electronics 126.0 129.8 Retail Revenues form online sales on the MondadoriStore.it website were up by around 4% The strategy, aiming to face the negative trend in the market, is focused on: - ongoing reorganisation of operating processes and staffing structures EBITDA ( mio) 9M14 9M14 9M13 9M13 -a reconfiguration of the network of stores - activities to improve the commercial proposal MondadoriStore was recently awarded Italy s 2014-2015 Insegna dell Anno (Retailer of the Year) in the Bookstore category -6.0-6.8 Improved EBITDA as a result of a reduction in fixed costs following the rationalisation of sales and store structures 20
Radio R101: highlights Revenues ( mio) -12.4% After the positive start in Q1, the radio market was affected by the negative trend in the advertising market, in particular in the period June-August, which had an impact on the performanceof R101 EBITDA ( mio) 7.8 9M14 9M14-4.2 8.9 9M13 9M13-3.1 Actions continued also in the third quarter to reinforce the audience through: - sponsorships of musical and sporting events - the redesign of the look and content of the www.r101.it website (the Facebook account recorded a 20% increase in users 90,000 new fans in 3Q14) - a new television channel (66 on digital terrestrial) dedicated to broadcasting music videos and tracks selected by the radio station The launch of the television platform integrated with the radio and other digital supports, will make it possible to offer a wide-ranging entertainment system EBITDA down in 9M14 as a result of the fall in advertising revenues and of higher costs incurred in communication for the re-launch of the station 21
Digital: highlights* Revenues ( mio) 42.2 42.8 8.5 33.7 9M14 +8.7% 11.8 31.0 9M13 Marketing Services Digital The Digital area saw a growth in revenues from purely digital activities - aimed at the more extensive enhancement of the Group s editorial content - of 8.7% while revenues from Marketing Services (Cemit) were down compared with 9M13 Italian Properties Advertising revenues: +4.1% (like-for-like) of which: - Grazia(+34.9%) - Donna Moderna (+1.1%) Audience: strong increase in traffic data - Grazia (+49%) - Donna Moderna (+34%) - Panorama (+9.5%) French Properties - Advertising revenues: +36% (omogeneo) - Revenues from NaturaBuy: +26% - Revenues from digital copies : +79% - Unique users website 1 of 6.6 million (+26%) and mobile 2 1.7 million (+77%) The acquisition of London-Boutiques.com aimed at the creation of the global e-commerce platform Graziashop.com, launched on 11 November *Revenues are represented in the different Business Areas and in the Parent company 1 22 Source: Nielsen, Aug. 2 Source: Nielsen, Jul.
Agenda 9M14 Highlights Market Trends 9M14 Results Business Areas FY 2014 Outlook 23
FY 2014 Outlook In a market that continues to be characterized by signs of weakness, although less marked than in the first half of the year, the actions taken by the Group regarding the strategic rationalisation of the business portfolio, along with the constant commitment to reducing both operating and structural costs, as well as the excellent performance recorded by the Magazine Area, in Italy and France have enabled the Group to improve during the year its capacity to generate financial resources In view of the current context and the above-mentioned actions, which will continue also in the last quarter of the year, for the fullyear 2014, it is reasonable to confirm the forecast already announced of an EBITDA for the Group higher than that of 2012, and of a consolidated net result at breakeven In line with the trend recorded in the first nine months of the year, it is expected by year end a significant improvement in the Group s Net Financial Position compared with 2013 24
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